KINGSWAY Corp Stock Compensation Disclosure
NOTE 16 STOCK-BASED COMPENSATION
On September 21, 2020, the Company's shareholders approved the 2020 Equity Incentive Plan (the "2020 Plan"). The 2020 Plan replaced the Company's previous 2013 Equity Incentive Plan with respect to the granting of future equity awards. The 2020 Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Share Awards, Dividend Equivalent Rights, Other Stock-Based Awards and Cash-Based Awards (collectively "Awards"). Under the 2020 Plan, an aggregate of 1.6 million common shares will be available for all Awards, subject to adjustment in the event of certain corporate transactions.
| (a) | Restricted Stock Awards of the Company |
Under the 2020 Plan, the Company has granted restricted common stock awards to certain officers of the Company (the "Restricted Stock Awards"). The Restricted Stock Awards vest according to a graded vesting schedule and shall become fully vested subject to the officers' continued employment through the applicable vesting dates. The Restricted Stock Awards are amortized on a straight-line basis over the requisite service periods. The grant-date fair values of the Restricted Stock Awards are determined using the closing price of Kingsway common stock on the date of grant. During the year ended December 31, 2025, 122,382 shares of the Restricted Stock Awards became fully vested. awards were granted during the year ended December 31, 2025. Total unamortized compensation expense related to unvested Restricted Stock Awards at December 31, 2025 was $1.4 million.
The following table summarizes the activity related to unvested Restricted Stock Awards during the year ended December 31, 2025:
| Weighted-Average | ||||||||
| Number of Restricted | Grant Date Fair Value | |||||||
| Stock Awards | (per Share) | |||||||
| Unvested at December 31, 2024 | 443,302 | $ | 5.01 | |||||
| Vested | (112,894 | ) | 5.04 | |||||
| Vested and Settled for Tax Withholding | (9,488 | ) | 8.10 | |||||
| Unvested at December 31, 2025 | 320,920 | $ | 4.91 | |||||
Stock-based compensation expense related to the Restricted Stock Awards was $0.6 million and $0.7 million for the years ended December 31, 2025 and December 31, 2024, respectively.
| (b) | Restricted Common Unit Awards of Subsidiaries |
Certain subsidiaries of the Company have granted restricted Class B common unit awards to officers of the various KSX subsidiaries pursuant to restricted unit award agreements (“KSX RUAs”). The KSX RUAs vest based on service and the achievement of criteria based on the IRR of the respective operating companies. The grant date fair value of the KSX RUAs are estimated using the Black-Scholes option pricing model (Ravix RUA only) or the Monte Carlo simulation model. The service condition vests according to a graded vesting schedule and shall become fully vested subject to the officer's continued employment through the applicable vesting dates.
The following table summarizes the KSX RUA activity during the year ended December 31, 2025:
| Subsidiary RUA | Unvested 12/31/2024 | Weighted-Average Grant-Date FV per Share at 12/31/24 | Granted | Vested | Unvested 12/31/2025 | Weighted-Average Grant-Date FV per Share at 12/31/25 | ||||||||||||||||||
| Ravix RUA | 49,695 | $ | 3.08 | — | (17,361 | ) | 32,334 | $ | 3.08 | |||||||||||||||
| SNS RUA | 36,979 | $ | 5.70 | — | (6,250 | ) | 30,729 | $ | 5.50 | |||||||||||||||
| SPI RUA | 89,625 | $ | 1.09 | — | (20,833 | ) | 68,792 | $ | 1.05 | |||||||||||||||
| DDI RUA | 91,361 | $ | 4.07 | — | (20,833 | ) | 70,528 | $ | 3.94 | |||||||||||||||
| IMSO RUA | 115,667 | $ | 6.12 | — | (26,042 | ) | 89,625 | $ | 5.93 | |||||||||||||||
| KPH RUA | — | — | 199,000 | (83,333 | ) | 115,667 | $ | 0.98 | ||||||||||||||||
| Roundhouse RUA | — | — | 199,000 | (83,333 | ) | 115,667 | $ | 2.85 | ||||||||||||||||
| Total | 383,327 | 398,000 | (257,985 | ) | 523,342 | |||||||||||||||||||
The table below summarizes information about the KSX RUA's outstanding at December 31, 2025:
| (in thousands, except units granted) | Stock Based Compensation Expense | ||||||||||||||||
| Unamortized | Years ended | ||||||||||||||||
| Subsidiary RUA | Units Granted | Date of Grant | Compensation Expense | December 31, 2025 | December 31, 2024 | ||||||||||||
| Ravix RUA | 199,000 | October 1, 2021 | $ | — | $ | 77 | $ | 102 | |||||||||
| SNS RUA | 75,000 | November 18, 2022 | 62 | 74 | 74 | ||||||||||||
| SPI RUA | 199,000 | September 7, 2023 | 57 | 31 | 31 | ||||||||||||
| DDI RUA | 199,000 | October 26, 2023 | 232 | 115 | 115 | ||||||||||||
| IMSO RUA | 199,000 | October 26, 2024 | 496 | 170 | 607 | ||||||||||||
| KPH RUA | 199,000 | March 14, 2025 | 92 | 106 | — | ||||||||||||
| Roundhouse RUA | 199,000 | July 1, 2025 | 290 | 310 | — | ||||||||||||
| Total | 1,269,000 | $ | 1,229 | $ | 883 | $ | 929 | ||||||||||
On March 14, 2025, KPH, a subsidiary of the Company, granted 199,000 restricted Class B common unit awards to an officer of Bud's Plumbing pursuant to an agreement dated March 14, 2025 ("KPH RUA"). The KPH RUA had a weighted-average grant date fair value of $0.85 per Class B common unit. The grant-date fair value of the KPH RUA was estimated using the Monte Carlo simulation model, using the following assumptions: expected term of years, expected volatility of 34% and risk-free interest rate of 4.26%.
On August 14, 2025, the Company modified the inputs related to the IRR portion of the KPH RUA to be based on the combined internal rate of return of Bud's Plumbing, Advanced Plumbing and Southside Plumbing. The modified portion of the award was probable of vesting both immediately before and after the modification. As a result, the fair value of the award that is subject to the IRR was measured at the modification date and compared to the fair value of the modified portion of the award immediately prior to the modification, with the difference resulting in incremental compensation expense of less than $0.1 million. The incremental fair value was estimated using the Monte Carlo simulation model, using the following assumptions at the modification date and prior to the modification: expected term of 4.6 years, expected volatility of 35% and risk-free interest rate of 4.21%.
On July 1, 2025, Longhorns LLC, a subsidiary of the Company, granted 199,000 restricted Class B common unit awards to an officer of Roundhouse pursuant to an agreement dated July 1, 2025 ("Roundhouse RUA"). The Roundhouse RUA has a weighted-average grant date fair value of $3.01 per Class B common unit. The grant-date fair value of the Roundhouse RUA was estimated using the Monte Carlo simulation model, using the following assumptions: expected term of years, expected volatility of 43% and risk-free interest rate of 4.22%.
| (c) | Stock Options |
Under the 2020 Plan, the Company granted 265,000 stock option awards to certain employees of the Company during the second quarter of 2024 (the "Stock Options"). The Stock Options vest and become exercisable ratably over a -year period and expire years after the date of grant. The Stock Options are amortized on a straight-line basis over the exercise period. The Company did grant any stock options during year ended December 31, 2025.
The following table summarizes the stock option activity during the year ended December 31, 2025:
| (in thousands, except per share data) | ||||||||||||||||
| Weighted- | ||||||||||||||||
| Average | ||||||||||||||||
| Number of | Weighted- | Remaining | Aggregate | |||||||||||||
| Options | Average | Contractual | Intrinsic Value | |||||||||||||
| Outstanding | Exercise Price | Term (in years) | (in thousands) | |||||||||||||
| Outstanding at December 31, 2024 | 265,000 | $ | 10.00 | 9.4 | $ | — | ||||||||||
| Granted | — | — | ||||||||||||||
| Outstanding at December 31, 2025 | 265,000 | $ | 10.00 | 8.4 | $ | 914 | ||||||||||
| Exercisable at December 31, 2025 | 53,000 | $ | 10.00 | 8.4 | $ | 183 | ||||||||||
The aggregate intrinsic value of stock options outstanding and exercisable is the difference between the December 31, 2025 market price for the Company's common shares and the exercise price of the options, multiplied by the number of options where the December 31, 2025 market price exceeds the exercise price.
Stock-based compensation expense related to the Stock Options was $0.2 million and million for the years ended December 31, 2025 and December 31, 2024, respectively. Total unamortized compensation expense related to unvested Stock Options at December 31, 2025 was $0.7 million.
The Company uses the Black-Scholes option pricing model to estimate the fair value of each option on the date of grant. The fair value of grants and the related assumptions used in the Black-Scholes pricing model for the Stock Options granted during the year ended December 31, 2024 were as follows:
| Years ended December 31, | ||||
| 2024 | ||||
| Weighted-average fair value of grants | $ | 3.73 | ||
| Risk-free interest rate | 4.57 | % | ||
| Dividend yield | — | |||
| Expected volatility | 41.7 | % | ||
| Expected term (in years) | 7.5 | |||
The risk-free rate was determined based on U.S. treasury yields that most closely approximated the option’s expected term. The dividend yield was determined based on the Company's dividend paying history. The expected volatility was calculated based on the weekly closing price of the Company's common stock over the expected life of the options. The expected term was determined by estimating a cost of equity for the Company to determine time to when the option would be at-the-money, and then adding that amount to the average time to vest.
| (d) | Employee Share Purchase Plan |
The Company has an employee share purchase plan ("ESPP Plan") whereby qualifying employees can choose each year to have up to 5% of their annual base earnings withheld to purchase the Company's common shares. After one year of employment, the Company matches 100% of the employee contribution amount, and the contributions vest immediately. All contributions are used by the plan administrator to purchase common shares in the open market. The Company's contribution is expensed as paid and for the years ended December 31, 2025 and December 31, 2024 totaled $0.2 million and $0.2 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 8, 2023 | |
| 2021 | Feb 28, 2022 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.